Alter Domus Sensus Magazine Issue 8 - Flipbook - Page 29
TRANSFER OF POWER:
FINDING OPPORTUNITY IN THE
SHIFT TO RENEWABLE ENERGY
Private equity has always followed the money. And these
days, the money is flowing away from fossil fuels toward
renewables. Todd Bright of Partners Group discusses the
wide array of opportunities created by this transition to more
Power is a hot sector these days. As our climate’s tipping
point draws alarmingly near, investment is moving quickly into
renewable energy and other sustainable businesses.
Indeed, the private equity industry is launching sustainable asset
funds at a record rate, in an effort to attract the institutional
money that is moving to planet-friendly investments. Private
equity funds that invest only in renewable energy assets raised
around USD $52 billion in 2020—a new high, according to
Preqin. And the money raised for such funds as of mid-2021
was greater than fossil fuel fundraising by a factor of 25.
Investment opportunities large and small are everywhere amid
this energy transition, from electrification as a service for fleet
operators and governments, to smaller-scale opportunities like
5-megawatt solar plants.
Partner, Head of Private Infrastructure Americas at Partners Group
INFRASTRUCTURE AS A SERVICE
WASTE MANAGEMENT FOR THE WORLD
The private equity and infrastructure asset classes are uniquely
positioned to put a dent in the problem of climate change, and
they can do so on a society-wide scale. Individual actions are
commendable, yes, but they will not move the needle to the
extent that deploying capital at scale can.
And then there is the other end of the funnel, where the carbon
comes out. The growing field of “carbon management” is
attracting a lot of interest from Partners Group and other firms.
Investors are thinking over the horizon, looking at novel efforts
like vehicle-to-grid power transfer. This means taking power
from the batteries in vehicles that are not being used and
putting the power back into the grid.
“Think about school buses, for example,” says Todd Bright,
Partner at Partners Group and head of the firm’s private
infrastructure in the Americas division, based in Houston. “Big
fleets that just sit in parking lots for much of the summer and
much of the day throughout the year, in the middle of the day,
when there might be a peaking need for power.”
To find opportunities like these, private investment firms like
Partners Group study broad societal and economic trends and
look for places where those trends might power sustainable
business models. For example, consider the trend toward
urbanisation and the growth of e-commerce for every need.
On the infrastructure front, there are supply-chain changes
being driven by the rapid increase in e-commerce. Distribution
centres are getting smaller and multiplying. That means more
touchpoints among those distribution centres and more
intermodal assets needed to connect them.
“The demand for those is increasing,” Bright says. “That
is an infrastructure as a service opportunity driven by the
acceleration of e-commerce and digitisation.”
28 SENSUS ISSUE 8
“One gigaton is 1 billion tons. That’s roughly equivalent to two
times the mass of the human population in the whole world. We’re
emitting about 40 gigatons of CO2 into the atmosphere per year.”
“That’s where we see the biggest bang for the buck—in
industrial decarbonisation,” says Bright. “When we talk
about carbon management, we’re talking about an emerging
social-infrastructure asset class. It’s essentially doing waste
management for a waste stream that is CO2. As a society, we
haven’t actively managed that waste stream in the past. But we
think society will do that now and into the future.”
Partners Group also has much experience in renewable energy.
It has built offshore wind farms in Europe and Australia. The
firm has invested in utility-scale solar in Japan and in Taiwan. In
the US, it has focused on the distributed-generation opportunity
set, including community solar, behind-the-metre commercial
and industrial solutions, and energy-efficiency solutions.
Partners Group is investing in carbon management now
because the need for CO2-reduction solutions is skyrocketing.
There are around 2,200 gigatons of carbon already in the
atmosphere. And when the world reaches 2,600 gigatons,
it will have reached the point of no return as far as meeting
“This is a next-10-year problem,” Bright says. “It’s not 2050,
not 2040. It’s the next 10 years.”
Encouragingly, there are the right ingredients in the US to
turn carbon capture into an investible infrastructure asset
class with economic incentives. The conventional energy
market holds decades of experience around CO2 capture
and transportation and injection into the ground learned in
practices like enhanced oil recovery. This knowledge can now
be repurposed toward carbon management.
“This is going to be a very big business in
the next five years. I think we’re all going to
be amazed at how big a business carbon
management is, not just in the US, but around
Partner, Head of Private Infrastructure Americas
at Partners Group